Stock markets take a hit from fresh fears for U.S. economy

The London stock market went into reverse today after poor jobs data cast fresh doubt on the U.S. economic recovery.

The US Labor Department said 115,000 jobs were added in April, against Wall Street expectations of 168,000 and down from an upwardly revised 154,000 in March.

Fearing that the world's biggest economy was in worse shape than thought, trader fled equities for safer bets like Government securities and gold.

Jobs shock: The New York market dropped on the poor employment data but European exchanges were more sharply down

In London, the FTSE 100 index slid 111.5 points - or 2 per cent - to close at 5,655.06, while while New York's Dow Jones Industrial Average was trading 1 per cent down and Germany's Dax and France's Cac-40 both closed 2 per cent off on the day.

In a separate survey, the U.S. unemployment rate fell to 8.1 per cent from 8.2, which - though the lowest level since President Barack Obama took office in 2009 - still troubled traders.

Chris Williamson, chief economist at financial information services firm Markit, said it was a 'further big disappointment for the US economy in the form of another month of weak hiring in April'.

Economists said the fall in unemployment was largely due to workers dropping out of the jobs market as participation fell to 63.6 per cent, the lowest rate in 30 years.

The report was published on the eve of President Obama's maiden re-election rally.

The unemployment rate rose from 7.8 per cent when Mr Obama took office in 2009 to 10 per cent as the impact of the financial crisis spread, and back down to 8.1 per cent.

The London market's heavily-weighted mining sector was hit by the dampened sentiment with Kazakhmys falling 6 per cent, Eurasian Natural Resources dropping 5 per cent and Evraz down 5 per cent.

But Britain's state-backed banks RBS and Lloyds managed to keep their heads above water as investors took cheer from their first-quarter trading updates.

The FTSE 100 is set to close the week around 2 per cent lower after continuing eurozone fears, focused in Spain and Germany, hit confidence earlier in the week.

Spain was confirmed to be in recession on Monday, while Germany's unemployment rate rose at the sharpest pace in three years in figures published on Wednesday.